Matrix, Inc., acquired 25% of Neo Enterprises for $2,000,000 on January 1, 2021. The fair value and book value of 25% of Neo’s identifiable net assets was $2,000,000 and $1,600,000 on that date, and the difference was attributable to assets that would be depreciated over 10 years. During 2021 Neo recognized net income of $500,000 and paid dividends of $400,000. Neo had a total fair value of $10,000,000 as of December 31, 2021. Required: 1. Prepare the journal entries necessary to account for the Neo investment, assuming that Matrix accounts for that investment as an equity-method investment 2. Prepare the journal entries necessary to account for the Neo investment, assuming that Matrix elects the fair value option.
Matrix, Inc., acquired 25% of Neo Enterprises for $2,000,000 on January 1, 2021. The fair value and book value of 25% of Neo’s identifiable net assets was $2,000,000 and $1,600,000 on that date, and the difference was attributable to assets that would be
Required:
1. Prepare the
2. Prepare the journal entries necessary to account for the Neo investment, assuming that Matrix elects the fair value option.
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